ANNOUNCER: Tonight on FRONTLINE, Correspondent Miles O'Brien journeys into the world of the regional airlines.

JOHN PRATER, Pres., Air Line Pilots Assn.: The major airlines created the regional industry as a way of lowering costs.

ANNOUNCER: -investigating the financial pressures-

COREY HEISER, Colgan Pilot, 2005-'09: If we didn't move those airplanes, they didn't make any money.

ANNOUNCER: -examining the experience of the pilots-

MILES O'BRIEN, Correspondent: Boy, nine months, you were a captain?

CHRIS WIKEN, Colgan Pilot, 2004-'08: Yeah.

MILES O'BRIEN: That- that's- that's quick.

CHRIS WIKEN: Almost scary, isn't it.

ANNOUNCER: -and asking what government regulators knew.

LORETTA ALKALAY, Fmr. Regional Counsel, FAA, 1987-'08: It was horrifying. I think anyone who read that file would have had the same questions that I had.

ANNOUNCER: Tonight, FRONTLINE investigates how corners were cut on safety-

BEN COATS, Colgan pilot, 2007-'08: I knew that this company was not playing by the rules and something bad is going to happen.

ANNOUNCER: -and the risks of Flying Cheap.

MILES O'BRIEN, Correspondent: [voice-over] It was February 12th, 2009. Inside air traffic control at Buffalo International, everything was running smoothly. Continental flight 3407 was on final approach from Newark. Then at 10:16, controllers suddenly lost contact with the crew.

CONTROLLER: Delta 1988, look out your right side about five miles-

MILES O'BRIEN: They scrambled to locate the plane.

CONTROLLER: Either state police or sheriff's department. Need to find out if anything is on the ground.

PILOT: It's just blackened and charred wreckage-

KAREN ECKERT: I had the TV on, but all of a sudden, a bulletin came on and they said there's a plane crash. All of a sudden, they announced it was a commuter flight from Newark, a commercial airline. And I screamed. I just screamed. And I looked at my watch and it was past the time she was supposed to land. And my husband sat up in bed, and I said, "I think Beverly's on that plane."

MILES O'BRIEN: Karen's sister, Beverly Eckert, was an insurance executive. She had lost her husband in the attack on the World Trade Center and had become a leader among the 9/11 families.

KEVIN KUWIK: We drove out to the crash site, and it seemed like it took forever. About that time, the state trooper or policeman in charge on the scene came on the radio and just said that, you know, this Continental plane had crashed into a house on Long Street, and at this time, it appeared there were no survivors. So at that- you know, at that point, you pretty much- you know, it was real.

MILES O'BRIEN: Kevin Kuwik's girlfriend, Lorin Maurer, was a passenger on flight 3407.

SCOTT MAURER, Father of Lorin Maurer: The phone rings and it's Kevin. And he just said, you know, "Scott, I got bad news," and he just broke it to us. He says, you know, Lorin was on this plane, and it went down and there are no survivors.

MILES O'BRIEN: The crash killed 49 on board and one on the ground.

Over the next several days, investigators from the National Transportation Safety Board, or NTSB, scoured the site and briefed family members on their findings.

KAREN ECKERT: I could sense in the briefing a certain amount of anger. You know, they were looking at icing. They were looking at a lot of things. But there was, like, a buzz in the room of all the families. We're all grief-stricken and we're listening, and I got the sense that something wasn't right.

SUSAN BOURQUE, Sister of Beverly Eckert: I think we were getting some signs that there was a bigger story here than- than just- I don't want to say just a crash, but a plane crash. It wasn't a mechanical defect.

MILES O'BRIEN: As a pilot myself and having reported on aviation for more than 20 years, I knew that accidents most always involve a chain of events, a series of underlying causes. I also knew that the downing of 3407 would focus attention on a growing sector of the airline industry. It turned out this Continental flight was operated not by Continental itself but by a smaller carrier called Colgan Air.

KEVIN KUWIK: She had sent me her- her itinerary, you know, and you pull it up from Orbitz, and you know, Continental. Everything on it was Continental, and in small print under the flight number, it was operated by Colgan.

SCOTT MAURER: No doubt in our mind that when she's buying this ticket, she's buying a flight on Continental, for which she believed she had Continental pilots and Continental safety and Continental service.

NTSB OFFICIAL: Today we are opening a public hearing concerning the accident that occurred on February 12th, 2009, at Clarence Center, New York.

MILES O'BRIEN: Three months after the crash, the NTSB held preliminary hearings on its investigation of 3407. At the start, they played a video depicting the last two minutes of flight.

KAREN ECKERT: Sitting there, the very tough part was watching the video, the recreation of the flight. What I realized on that flight is the quiet part of the flight, you're descending. You're approaching. And five miles out of Buffalo, that's a quiet time. And all of a sudden, that plane- and they showed that pitch and roll, and you count- if you count how many seconds of absolute terror must have been in those, it was horrible. It was horrible.

MILES O'BRIEN: During the hearings, the evidence suggested the cause of the crash was not icing but rather pilot error.

DEBORAH A.P. HERSMAN, NTSB Member: So in your expert opinion, what did this crew do correctly and what did they do wrong?

MARK V. ROSENKER, Acting Chairman: Do you believe this was a recoverable stall?

WALLY WARNER: My opinion is yes.

MILES O'BRIEN: [on camera] Here's what the black boxes told investigators in a nutshell. The airplane was on final approach to Buffalo. The landing gear came down and it started losing speed very quickly. Very soon, a warning system came on, a wheel shaker to tell the pilot that the plane was going too slowly to fly. He's supposed to push on that wheel when that happens.

Instead, he pulled back. The speed got even slower. And then another system kicked in, a pusher, in which the plane tries to push the nose over itself to gain airspeed. Instead, the captain pulled back. And then the first officer put the flaps up, and that made matters worse. The plane stalled, spun and crashed into the ground.

[voice-over] The NTSB investigated the professional backgrounds of the pilots. The captain, Marvin Renslow, was 47. He was hired by Colgan in 2005 with only 618 hours of flying time, less than half the time required by most major airlines. The NTSB found that Captain Renslow had failed five performance tests, or check rides, some of which Colgan had failed to discover.

The first officer, Rebecca Shaw, 24, joined Colgan in January 2008. She made less than $16,000 in her first year at Colgan and spent the night before the crash commuting from her home in Seattle.

DEBORAH A.P. HERSMAN: She commuted from Seattle to Memphis, stayed in a crew lounge in Memphis from midnight to 4:00 AM, commuted from Memphis to Newark from 4:00 to 6:30, and then hung out in the crew lounge in Newark until her 1:30 show time.

MILES O'BRIEN: The transcripts of the cockpit voice recorder provided clues about other problems. The first officer seemed under the weather and concerned about the cost of calling in sick. "If I call in sick," she said, "now I've got to put myself in a hotel until I feel better." And both pilots appeared tired. The transcript notes sounds similar to yawns.

MARK V. ROSENKER: We are going to find out what happened here.

MILES O'BRIEN: The investigation threw a spotlight onto the operations of Colgan and raised questions about pilot qualifications, training and pay. The story that emerged shocked family members and even industry insiders.

BILL VOSS, Pres., Flight Safety Foundation: There are some accidents that really make you step back and take a look at what's happening in the system. 3407 forces us to look at issues like commuting, fatigue. It forces us to look at training. It forces us to look at fundamental regulatory relationships. Absolutely. It's a very important, important event.

CLAY FOUSHEE, Congressional Investigator: It's become the symbol of everything that's wrong with the industry,

MILES O'BRIEN: [on camera] The term "watershed" comes out frequently. Is this a watershed accident?

CLAY FOUSHEE: I think it is. I think it is. Certainly, for this decade, it is the watershed accident.

MILES O'BRIEN: [voice-over] The story of flight 3407 really begins in Manassas, Virginia, at a regional airport about 30 miles west of Washington, D.C., where I found the roots of Colgan Air. The company's rapid rise as a regional carrier is a story of how the airline industry has changed over the past 30 years. Colgan got its start here in 1965.

WILLIAM SWELBAR, MIT Airline Researcher: The Colgan family operated a fixed base operation in Manassas, Virginia. And out of that grew an air taxi operation, where it is that Colgan would contract with X company to fly from A to B.

MILES O'BRIEN: [on camera] Charter kind of thing.

WILLIAM SWELBAR: Charter kind of thing.

MILES O'BRIEN: [voice-over] Chuck Colgan is a former Air Force pilot who built his charter company by first flying IBM executives between Washington and the company's main plant in Poughkeepsie. Then Colgan got a big break when, in the late '70s, the government deregulated the airline industry. Deregulation brought increased competition and lower airfares. It also brought a new operating model called the hub and spoke. The major airlines created central hubs in big cities and turned to small regionals or commuters to feed their networks.

[www.pbs.org: Map: airports and their regionals]

CLAY FOUSHEE: So they created these mechanisms where, "OK, we'll buy," you know, "50-seat airplanes for you. You'll set up or expand an existing company, and we'll make it look like that it's actually our airline. You buy the ticket from us, but," you know, "you're really flying on this other carrier."

MILES O'BRIEN: The new model of contract flying was called a "code share." The regional airline carried the same ticketing code and colors as the major. And under most contracts, the regionals were paid a set profit on each flight they completed, regardless of how many passengers they carried.

JOHN PRATER, Pres., Air Line Pilots Assn.: So there's a margin there of profit. But if you can hold down the pilot cost, if you can hold down the flight attendant cost, maintenance cost, those carriers make even more money.

MILES O'BRIEN: The new business model got a big boost in the '90s with the introduction of smaller jet aircraft that allowed the regionals to carry more passengers to farther destinations. And that was good for consumers, who benefit from what the industry's chief spokesman calls "seamless travel."

ROGER COHEN, Pres., Regional Airline Assn.: The real secret, and why people haven't realized that there has been this transition, is that the passenger buys one ticket, doesn't have to check his bag on two or three different airlines, puts it through, gets on an aircraft that is modern, looks the exact same way, the seat magazine that says Continental. So that is a seamless experience for the traveling public.

MILES O'BRIEN: The new code share contracts were part of a seismic shift in the competitive structure of the industry that took hold in the late '90s. Discount carriers like Southwest were grabbing more and more market share, putting increasing price pressure on the major airlines, forcing many into bankruptcy.

WILLIAM SWELBAR: The low-cost carriers were in full wing at this point, growing, growing aggressively. That clearly, you know, helped to compress fares. And I think the most- probably the most important thing, fares were now available on the Internet. Now I could go on the Internet and shop for the lowest fare.

MILES O'BRIEN: The chase for cheaper airfares put tremendous pressure on mainline carriers like Continental Airlines. Gordon Bethune had brought Continental back from the brink of bankruptcy in the mid-'90s.

GORDON BETHUNE, CEO, Continental, 1994-'04: Winning is defined in our business as beating your competition, just like a horse race. You don't have to be the fastest horse on the planet, just beat these other horses. That's what makes this business exciting. While you and I are having this conversation - let's say we're an airline business - our competitors would be screwing us. They'd be changing a flight of one of 1,800 at a time of day or a fare or something. Never stops. Never, never stops.

MILES O'BRIEN: Like other major airlines through the '80s and '90s, Continental had built up its own regional airline, Continental Express. But to stay competitive, Bethune sold off Continental Express and began outsourcing more and more flying to independent airlines.

[on camera] What was the whole thought process in putting this type of flying on to another company?

GORDON BETHUNE: It's a different kind of business. It's regional jet flying, and small airplanes aren't big airplanes, and the different employees, different labor standards, different wage rates, right?

MILES O'BRIEN: It's still airplanes, transportation, moving passengers safely. How does the distance traveled and the size of the airplane make it a different business, from your perspective?

GORDON BETHUNE: They're all flying airplanes, but they're not flying the kind of airplanes you are, with the same kind of standards that you're flying. And so you let that operate as it's an independent business because other people are in that business, but you can't afford to have a lot of excess cost and still win a contract. So it makes the management be cost-effective.

JOHN PRATER, Pres., Air Line Pilots Assn.: The major airlines created the regional industry as a way of lowering costs. They don't want to pay employees, and I don't' care whether it's pilots, flight attendants, mechanics, ground help. They wanted to find a way of getting rid of experience. They wanted to find a way of getting rid of that expensive employee. And let's start this new industry and call it the regional industry.

MILES O'BRIEN: [voice-over] Today, more than half the commercial flights in the United States are flown by regional airlines.

BILL VOSS, Pres., Flight Safety Foundation: The industry really restructured itself, fundamentally. And there were decisions that were made about what services should be in-sourced to the mainline carriers and what were most efficient to be out-sourced. And we ended up with a different structured industry than people have probably anywhere else in the world, where these regional carriers are vitally important.

MILES O'BRIEN: Regional carriers were growing rapidly. By 2005, Colgan had successfully bid and won flying contracts with Continental, US Air and United Airlines serving regional markets across the Northeast and throughout Texas. In just four years, Colgan had more than doubled in size.

[on camera] That's a lot of growth to manage there, isn't it.

WILLIAM SWELBAR: A lot of growth for Colgan to manage. This has been a lot of growth for the regional sector to manage, from flying a small portion of overall flying to operating 52 percent of the departures today. You know, it's been a huge transition for the regional sector.

MILES O'BRIEN: [voice-over] Even before the crash of 3407, there were growing safety concerns about the regional airlines. Since 2002, the last six fatal commercial airline accidents in the U.S. have all involved regionals. In four of the accidents, the NTSB cited pilot error as a cause.

The investigation of 3407 opened a window into the lives of regional pilots, where the work is hard and the days are long, says former Colgan pilot Chris Wiken.

CHRIS WIKEN, Colgan Pilot, 2004-'08: It's challenging. It's very challenging- a lot of short routes, a lot of take-offs, a lot of landings, and going in and out of bad weather, being down low. Especially at Colgan, flying the turboprops, you're not flying above the weather, you're flying in the weather. You know, eight, nine, ten flights a day, it gets to be a very long day.

MILES O'BRIEN: While FAA regulations limit pilots to eight hours of actual flight time a day, pilots may be on duty for up to 16 hours a day. But that doesn't mean a big paycheck.

COREY HEISER, Colgan Pilot, 2005-'09: We are only paid when the door's closed and the engines are running. As soon as we block out of the gate, we close that door, that's when we start. All the time we're walking through airports, eating lunch, reading a book while we wait for an airplane standing at the gate, you know, we're not paid for that time. We may be on duty for 80 hours a week and get paid for 20 of it, if we're lucky.

MILES O'BRIEN: Pilots are paid hourly, and starting pay for first officers is typically $21 an hour.

COREY HEISER: My first year was- I made a little over $22,000 gross. And then you put into the fact that you have, you know, mortgages and- and rent for a crash pad, student loan payments, car insurance and whatnot, you know, by the time it all got said and done, we were literally starving at the end of the day.

MILES O'BRIEN: To make ends meet, many pilots choose to commute, living in less expensive communities far from the base they fly from.

[on camera] Commuting has always been a part of aviation, but if you're making $16,000 or $18,000 a year and you're commuting, you're sleeping on the Barcalounger in the pilots' lounge. And that's not good, is it.

ROGER COHEN, Pres., Regional Airline Assn.: Let's get the facts out on- on the table on this, Miles. The average salary for a regional airline captain is $73,000. The average salary for a first officer at a regional airline is about $32,000, $33,000 a year.

MILES O'BRIEN: I'm not talking about average. There are some people, as you well know, who make $18,000 to $20,000 a year. We're not talking about average. We're talking about human beings who are flying my grandmother to Buffalo, right? OK, so there are people there living this life, and it seems as if they're in an untenable position economically.

ROGER COHEN: Absolutely not because there are many other people who- who earn less money than that, who work more days in these communities that can afford it and do do it and do it responsibly. I just checked the Web this morning. You can get a hotel room at the Newark airport for $50 a night.

MILES O'BRIEN: Fifty dollars a night, if you're making $20,000 a year, that adds up, doesn't it.

COREY HEISER: Adds up very quickly, if you have a base salary roughly $1,200 a month is what you take home, $50 a - $50 a night for a hotel's going to disappear relatively fast.

MILES O'BRIEN: And of course, I don't know if you've ever tried to find a hotel at that rate near Newark, but-

COREY HEISER: It's most likely not going to be in the safest of neighborhoods.

MILES O'BRIEN: [voice-over] Low pay and high living costs have created an underground housing market in the airline industry. They're called "crash pads." Some regional pilots let us inside their crash pads in a Northeastern city if we agreed not to reveal their location.

CHRIS WIKEN: You can picture a one and two-bedroom apartment with 8, 10, 12, 14 guys in it, on, you know, roll-out mattresses and sleeping on the floor, sleeping on the couch, sleeping in bunk beds, air mattresses, waiting in line for the shower.

COREY HEISER: I had a crash pad in Albany, New York. We had nine people living in a small two-bedroom apartment. We had guys living on the- sleeping on the couch. They rented a couch. Guys had rented a closet, a big walk-in closet. And then you'd have three or four guys crammed in a little, itty-bitty 10-by-10 room, hardly bigger than jail cells, it seemed like, sleeping on air mattresses. We couldn't afford to rent our own apartment. We just did not make enough money to be able to pay for that.

MILES O'BRIEN: The lives of regional pilots may not be glamorous, but they offer young pilots a fast track to the captain's seat. At the major airlines, it takes pilots five to ten years to upgrade from first officer to captain, but not at the regionals.

CHRIS WIKEN: At Colgan, I upgraded very quickly, within my first year. I upgraded in about nine months, if I remember right.

MILES O'BRIEN: [on camera] Boy, in nine months, you were a captain?

CHRIS WIKEN: Yeah.

MILES O'BRIEN: That- that's- that's quick.

CHRIS WIKEN: Almost scary, isn't it!

MILES O'BRIEN: So that's a- that's not a deep reservoir of experience in the cockpit.

CHRIS WIKEN: Yeah. There's not a very deep well to draw from in terms of experience and knowledge. Absolutely true. One of the first first officers that flew with me when I became captain was actually a guy that I was in ground school with in my initial new hire class.

MILES O'BRIEN: Wow.

CHRIS WIKEN: So I had 500-and-some hours. He had 400 and was soon- soon going to upgrade in that airplane.

MILES O'BRIEN: A couple of relatively-

CHRIS WIKEN: New guys.

MILES O'BRIEN: -new guys.

CHRIS WIKEN: Yeah, we had just- we were brand-new to the airline game, nine months in. Nine months in.

MILES O'BRIEN: I don't think- I don't think passengers know this, do they.

CHRIS WIKEN: I'm sure they have absolutely no clue. I'm sure they have absolutely no idea.

[www.pbs.org: Wiken's extended interview]

MILES O'BRIEN: [voice-over] Just one month before the crash of Continental 3407, it was a very experienced crew that brought 150 passengers to safety on the Hudson River.

CLAY FOUSHEE, Fmr. V.P., Northwest Airlines: Sully was exactly what we all want to see in the airline pilot. He's a teacher. He's a proficient pilot. He, you know, is a master manager. And he also happened to have a very skilled person sitting in the right seat with him. That mentoring process is where a lot of younger pilots gain experience. That's how they learn. In the regional industry, you don't see that today,

MILES O'BRIEN: [on camera] It wasn't like you were seeing Continental check airmen or-

COREY HEISER: No, not at all.

MILES O'BRIEN: -senior pilots coming around, saying, "Hey, let me sit down with you and talk to you about how to"-

COREY HEISER: No.

MILES O'BRIEN: --"fly in these conditions."

COREY HEISER: No, because that's- you know, that's Continental- that's their pilots. That's their pilot group. And then we have Colgan, and there's a clear distinction. It's split there.

MILES O'BRIEN: So as long as you show up when you're supposed to show up for Continental, they didn't get in your business.

COREY HEISER: Continental, as far as my knowledge, never had any involvement with Colgan. I mean, they- they signed the contract and said, "You will fly these- these routes," and Colgan was responsible for crew training and everything else.

MILES O'BRIEN: [voice-over] Continental's relationship with Colgan was primarily business. Colgan was paid for each flight, and their pay depended on completion of the flight.

CLAY FOUSHEE: And they get paid based on a completion factor in some contracts, which raises a question, a disturbing question, because if you have a cancellation or you deviate due to weather, are they actually going to get paid for flying? Or are we incentifying regional carriers to actually complete segments when it may not be safe to do so, when the safest thing may be to cancel that flight, or divert to a different airport?

MILES O'BRIEN: [on camera] Doesn't that create an incentive which is contrary to safety? In other words, you get your money if you get that plane from Newark to Buffalo.

ROGER COHEN, Pres., Regional Airline Assn.: Safety is the number one priority, and there is no airline, no matter what the business arrangement, that would ever operate any aircraft at any time and risk the safety of the passengers and crew. So it's totally unrelated to any type of business arrangement.

[www.pbs.org: Cohen's extended interview]

CHRIS WIKEN: They said safety was a priority a lot. In my experience, however, on a day-to-day basis, being on time and completing the flight was much more important. Much more important.

MILES O'BRIEN: What happened if you were tired or sick, or both sick and tired, and you called in and said, "I can't do this trip"? What happened then?

CHRIS WIKEN: I was actually one of them that claimed fatigue at one point. I had a number of 16-hour duty days in a row and-

MILES O'BRIEN: Full 16-hour.

CHRIS WIKEN: Full 16-hour days. And I- and I swear to God that this is true. Our vice president of operations got on the phone with me and said, "Well, you know, are you- you're going to be stuck in Hyannisport, you're going to be stuck in Hyannis for the night if you claim fatigue right now. Wouldn't you like to get home? We can, we can, you know, shorten your duty day for you. Instead of saying you showed up at 5:40 this morning, we can say you showed up at 6:00, and that would give you that extra 20 minutes to take that flight back to Albany."

MILES O'BRIEN: So to be clear, he was offering to falsify the records so that you would appear to have flown a legal FAA-sanctioned day when you didn't, or weren't.

CHRIS WIKEN: Correct.

COREY HEISER: The saying around the company was always, "Move the rig." And that just kind of told me that they were willing to kind of push the bounds.

MILES O'BRIEN: Why were they pushing?

COREY HEISER: Because if we didn't move those airplanes, they didn't make any money.

MILES O'BRIEN: [voice-over] Last August, the relationship between the major carriers and their regional partners was explored at a hearing in the U.S. Senate. Several airlines were asked to testify, including Continental and Pinnacle Air, the company that bought Colgan in 2007.

Senators probed the extent to which major carriers like Continental take responsibility for the safety operations of their regional partners.

Sen. BYRON DORGAN (D), North Dakota: Captain Gunther, you stated that you didn't believe the network carriers should serve as a safety check for operation and performance of the regional carriers. I think the position is that's the FAA's job.

MILES O'BRIEN: One reason some majors don't want to take responsibility for the safety of their regional partners is because they don't want to assume the legal liability, says plaintiff's lawyer Mary Schiavo.

[on camera] What about liability, though? When you set up a- when you set up a contract like this and something bad happens, like happened in Buffalo, who's liable?

MARY SCHIAVO, Plaintiff's Attorney: What people think is because- in the case of the Buffalo crash, because "Continental" is painted on the door of the plane, they think that Continental is responsible. In fact, their contract with their code share carriers say that the code share carrier, the- the contracting carrier, the Colgan of the world, is absolutely completely and totally responsible for the safety of the operation of that flight. And by the way, if something goes wrong with that flight, Colgan has to indemnify Continental, or in the-

MILES O'BRIEN: "Indemnify"-

MARY SCHIAVO: -past, you would-

MILES O'BRIEN: -"defend, protect, save and hold harmless"-

MARY SCHIAVO: That's right.

MILES O'BRIEN: -is the term in the US Airways code share agreement with Colgan.

MARY SCHIAVO: They're pretty much all like that.

MILES O'BRIEN: So they go off the hook?

MARY SCHIAVO: Actually, yes. They go off the hook.

MILES O'BRIEN: And this holds up in court?

MARY SCHIAVO: Yes.

Sen. MIKE JOHANNS (R), Nebraska: If we had bipartisan bill that basically said from a safety standpoint, from a liability of the major carrier, that there would be joint and several liability for any negligence that occurs by the regional, so that they'd both be responsible when it comes to safety purposes, would you folks support that?

Sen. MIKE JOHANNS: Would you get back to me on that? That's a very important question.

STEPHEN DICKSON: Of course.

Sen. MIKE JOHANNS: Mr. Gunther?

DON GUNTHER, V.P., Safety, Continental: Same thing, sir. We'll get back to you on that.

Sen. MIKE JOHANNS: OK.

MILES O'BRIEN: [voice-over] The committee says it has not heard back from the airlines.

We wanted to ask both Continental and Colgan about their contracts and their relationship, but neither would grant an interview.

[on camera] In the case of Continental, the company has made it very clear that they're not involved in how that airline does its business when it comes specifically to the issue of safety. They don't get in their hair. They say it's up to the FAA.

ROGER COHEN, Pres., Regional Airline Assn.: The most important point here about- about safety in this industry is that there can only be one regulator because you couldn't have various carriers overseeing with different standards, different rules for any type of aviation, whether it's general aviation, commercial aviation. All flying can only have one regulator. And that's why we have such a safe system that we have today.

MILES O'BRIEN: [voice-over] Relying on the FAA to ensure that all carriers fly safely has its limits. The FAA has less than 4,000 inspectors responsible for overseeing the safety of about 25,000 commercial flights in the U.S. every day. The crash of 3407 has raised anew questions about how well the FAA is doing its job, questions that had previously surfaced in the mid-'90s with the rapid rise of a low-cost airline called ValuJet. As ValuJet grew, so did its safety troubles, yet the FAA failed to heed warnings about repeated problems.

Mary Schiavo was the inspector general of the Department of Transportation at the time.

MARY SCHIAVO: Instead of hitting them with - with violations, they were propping them up. My office said, "Whoa. Wait a minute. This doesn't pass the smell test." When you've got an airline having this many problems, the FAA isn't doing proper oversight.

NEWSCASTER: Hopes are fading now of finding any survivors from the crash of a ValuJet DC-9 that went down-

MILES O'BRIEN: Then in 1996, ValuJet flight 592 from Miami caught fire and crashed into the Everglades.

NEWSCASTER: Reportedly, the FAA says there were 109 people on board.

MARY SCHIAVO: The secretary of transportation and the head of the FAA went into protective overdrive. The secretary of transportation flew down to Miami and stood in the Everglades, literally on the watery grave of 110 people, and said, "ValuJet is a safe airline."

FEDERICO F. PENA, Secy. of Transportation 1993-'97: And I want to emphasize that I have flown ValuJet. ValuJet is a safe airline, as is our entire aviation system.

MARY SCHIAVO: I was very angry because they knew that that airline was troubled. Why? Because I'd been called in to the secretary of transportation's office. The FAA administrator knew we were down there, looking. We had presented some of our findings already.

MILES O'BRIEN: [on camera] Were they lying to the public?

MARY SCHIAVO: I think so.

MILES O'BRIEN: Why?

MARY SCHIAVO: Because the FAA protects airlines.

MILES O'BRIEN: [voice-over] The FAA's response to ValuJet exposed an inherent conflict in the agency's original mandate.

MILES O'BRIEN: After the ValuJet crash, Congress, under public pressure, removed "promotion" from the FAA mandate. But a closer look at the legislation tells a different story.

MARY SCHIAVO: There's a footnote in that legislation before Congress, and the footnote said, "Although we're changing the terminology from `promote' to `encourage,' we do not intend to change the way we do business. This is a change for the public consumption, and we're not changing how we work at the FAA." It was simply a sleight of hand.

MILES O'BRIEN: Nick Sabatini worked inside the FAA for 30 years and was the head of aviation safety from 2001 through 2008.

NICK SABATINI, FAA, Aviation Safety, 2001-'08: I never did see that there was a conflict. I could easily compartmentalize. If I'm encouraging you to do better, I'm not encouraging you to necessarily grow your business, in terms of promoting aviation. The promotion was promoting aviation safety, as we saw it.

MILES O'BRIEN: Under Sabatini, the FAA forged a new regulatory approach with the industry called "partnership programs." The FAA relied more on the airlines to self-report problems and help identify emerging safety risks.

NICK SABATINI: We need to learn what those unknown risks are out there. Who is best positioned to know what risks they see every day? It's people who are operating the system and have their hands on the system every single day.

MILES O'BRIEN: But critics say the FAA's collaborative approach went too far. A policy directive in 2003 called the Customer Service Initiative identified the airlines as the FAA's customers and encouraged the industry to challenge the decisions of FAA inspectors.

CLAY FOUSHEE: The problem, though, with the Customer Service Initiative, the way it was pushed, the way it was implemented, the way it was communicated to the workforce- it sent the wrong message, sent a very bad message to the industry. It sent the message that, "Look, I can cut a deal." And all you had to do was make a phone call to, you know, somebody that you became friends with over the years and request reconsideration and it would be taken care of.

MILES O'BRIEN: Both the FAA and industry say their success working together is born out by statistics, that flying today is safer than ever. Prior to the crash of 3407, it had been two-and-a-half years since the last fatal commercial airline accident in the U.S.

[www.pbs.org: More on FAA and safety]

NICK SABATINI: In those intervening years, the United States air transportation system transported two billion people, maybe a little bit more. That is the equivalent of having transported the population of the United States more than six times without putting a scratch on anybody.

MILES O'BRIEN: But in the airline industry, there's a common expression that the absence of accidents doesn't necessarily mean you're safe.

[on camera] When people say that, what do they mean?

BILL VOSS, Pres., Flight Safety Foundation: Well, what you really have to look at are the thousands of things that lead up to the accident in the first place. Human beings will make a lot of little mistakes that serve as a warning before a big mistake occurs, and a big consequence. So what it means to really be safe is to be focused on those little warning signs and catching them early. It's only when we miss a bunch of those warning signs that we have a tragedy.

[www.pbs.org: Watch this program on line]

MILES O'BRIEN: [voice-over] The question in the wake of 3407 is whether the FAA missed warning signs about safety problems at Colgan Air. As early as 1998, Colgan's problems were evident when the company began to grow as a regional airline. Colgan was supposed to upgrade its operations to meet the same level of safety as the major airlines.

But in a letter from Colgan to the FAA obtained by FRONTLINE, the company acknowledged it had to make significant improvements in order to meet the more stringent safety standards, known as Part 121 regulations. The company committed to making substantial changes in pilot training, record keeping, management, maintenance and safety audit systems. The letter was signed by company founder Chuck Colgan.

But seven years later, in 2005, Colgan was still not meeting its regulatory requirements, says Chris Monteleon, who was a lead FAA inspector overseeing Colgan's growing operations.

CHRIS MONTELEON, Fmr. FAA Inspector of Colgan Air: There were not enough managers. There were not enough check airmen. There were not enough maintenance personnel.

MILES O'BRIEN: [on camera] Were they just overwhelmed?

CHRIS MONTELEON: They were acting as if they were overwhelmed. They couldn't control their business, the safety part of their business.

MILES O'BRIEN: [voice-over] Monteleon says he took his concerns about Colgan to his office manager at the FAA, recommending enforcement actions against the company. But his manager, he says, was getting pushback from company president Mike Colgan.

CHRIS MONTELEON: Mike Colgan would call, or in some cases, it got to the point where he wrote about me to the office manager. And the office manager one time told my team, he said, "Mike Colgan is a friend of this office," and that was the message. I mean, it was, like, well, we already knew it, but he felt the need to reinforce it.

MILES O'BRIEN: [on camera] Did you, in the course of that, feel pressure not to stop that growth? In other words-

CHRIS MONTELEON: Absolutely.

MILES O'BRIEN: -were you seen as a roadblock?

CHRIS MONTELEON: Oh, absolutely.

MILES O'BRIEN: [voice-over] The FAA office manager says he does not recall making those statements. But three years later, there were still problems when Colgan got another big contract from Continental. Colgan began flying a new airplane called the Q400, the type of plane that would crash in Buffalo.

[on camera] Did you get the sense that everybody was a bit overwhelmed by this airplane?

COREY HEISER, Colgan pilot, 2005-'09: Yes, because there was a lot of growth. It was almost the same thing that was faced with the 2005 expansion, with this 2008 expansion of the Qs. There was a lot of growth, a lot of growing pains suffered by the company, as well as the crews, because it was- it was new to all of us. None of us had ever operated this airplane before.

MILES O'BRIEN: [voice-over] In February 2008, Colgan began flying passengers on the Q400. But the FAA was soon concerned that Colgan pilots were having trouble flying the airplane. There were reports that pilots were exercising poor judgment, and Colgan was short on check-airmen, or supervisory pilots, for its Q400 fleet.

[on camera] So I guess- were you a little surprised when they came to you and said, "We want you to fly and supervise this crew"?

COREY HEISER: Very surprised.

MILES O'BRIEN: Why was that?

COREY HEISER: Because I'm not type-rated in the aircraft. I'm not qualified in the aircraft. I had never flown the aircraft, and I didn't even know what the limitations of the aircraft were, let alone it was very unclear as to exactly what we were supposed to be doing.

MILES O'BRIEN: So did you have the sense they just wanted a warm body in that seat?

COREY HEISER: Yes.

MILES O'BRIEN: [voice-over] There were other warnings about the safety culture at Colgan in 2008. In this NTSB file, we found a case that alarmed the FAA. It involved the actions of a Colgan captain on a flight out of New York City. The first officer on the flight was Ben Coats. It was Coats's job to calculate the weight limit on the flight, and his calculations showed the plane would be too heavy to fly.

[on camera] And you say to the captain, "Captain, we're even more overweight than we thought." What did he say?

BEN COATS, Colgan pilot, 2007-'08: Well, he said, "Well, why don't we just count three of those adults as children."

MILES O'BRIEN: Really?

BEN COATS: Yeah, "Just mark them down on the sheet as children and that'll put us under weight." That's what he suggested.

MILES O'BRIEN: [voice-over] Coats says he refused, and the captain took the weight manifest from him. Only after landing did Coats discover what had happened with the manifest.

[on camera] So when you looked at the paperwork, which had all the information on the weights and balances for the plane, what did you see?

BEN COATS: Well, I saw that it had been altered. My math had been altered. It had been changed so that our plane would no longer be overweight.

MILES O'BRIEN: He made the limit higher-

BEN COATS: Exactly.

MILES O'BRIEN: -so the plane would fit.

BEN COATS: Yes.

MILES O'BRIEN: And what you ended up with was a very heavy aircraft.

BEN COATS: Yes, a very hard to fly- hard to climb, at least- airplane.

MILES O'BRIEN: Unsafe, illegal airplane.

BEN COATS: Yes.

MILES O'BRIEN: Dangerous.

BEN COATS: Yes.

MILES O'BRIEN: Very dangerous, actually.

BEN COATS: Very dangerous.

MILES O'BRIEN: [voice-over] Coats felt it was so dangerous that he filed a complaint with the FAA. The case landed on the desk of the agency's top regional attorney, Loretta Alkalay.

LORETTA ALKALAY, Fmr. Regional Counsel, FAA, 1987-'08: There were shocking allegations of violations by an airline captain, falsifying a load manifest to indicate that there were fewer passengers than there actually were and flying over gross. So it was a pretty outrageous case.

MILES O'BRIEN: Based on its investigation, the FAA revoked the captain's license.

LORETTA ALKALAY: And I think the biggest issue really is what did Colgan do? I mean, what did Colgan do when we revoked one of their pilots? I mean, that's really the question. What did they do? I mean, you would think that they had done a top-to-bottom review about what was going on.

MILES O'BRIEN: But what Colgan did surprised Alkalay. The company testified at an appeal hearing in support of the captain.

BEN COATS: I don't know. Not my model. But apparently, Colgan's model, according to the director of operations. And he said that under oath in an NTSB hearing, which raises the question in my mind, how come Colgan isn't under investigation? Why do they still have an air carrier certificate, especially if their director of operations is, you know, officially supporting an unsafe captain and not supporting a- you know, a first officer who's trying to scream safety?'

LORETTA ALKALAY: I don't understand why they would come in and support him. I mean, it was- it was breathtaking in its horror at the time. I mean, it was horrifying.

MILES O'BRIEN: So that, to you, presented a whole host of other questions about this particular airline, Colgan.

LORETTA ALKALAY: I think anyone who read that file would have had the same questions that I had. It just raised red flags as to whether or not there was a corporate culture that needed to be looked at.

MILES O'BRIEN: [voice-over] FRONTLINE has learned that the safety warnings contained in this case were forwarded to FAA headquarters in Washington. It was just four months before the crash of Continental flight 3407.

The Buffalo crash has galvanized efforts to raise safety standards at the regional airlines. The families of the victims are lobbying Congress for legislative changes that strengthen pilot qualifications, raise training standards and improve fatigue policies.

SUSAN BOURQUE, Sister of Beverly Eckert: I think the signs were all there in the beginning. I mean, this has all been out there, it just wasn't exposed. And it's a shame that these issues weren't able to be addressed and brought to the forefront until this plane fell out of the sky.

[www.pbs.org: The families' campaign]

MILES O'BRIEN: But the fixes the families are pushing have met resistance. The regional industry has its own views on how much change is needed. The CEO of Pinnacle, the current owner of Colgan, was in Washington at those August senate hearings.

SCOTT MAURER: Mr. Trenary came over to offer his condolences to the families, et cetera. And he came up to me, and I said, "Well, there's nothing going to change what happened. You know, we can't change that," I said, "but we do hope to change things moving forward, and we need to get this thing fixed." And he looks at me- he looks at me and he says "We fixed it."

MILES O'BRIEN: [on camera] Just like that.

SCOTT MAURER: And it took my breath away. I looked back at him and I said "Excuse me?" And he says "We agree. It needs to be fixed, and we've fixed it."

RANDY BABBITT, FAA Administrator: As you are aware, on June 15th, we made this Call to Action to promote a renewed and robust safety discourse within the aviation community.

MILES O'BRIEN: [voice-over] The new FAA administrator is also optimistic about fixing the problems. The agency is developing new pilot work rules and has launched an industry-wide "Call to Action" that encourages all airlines to voluntarily share their best safety practices.

RANDY BABBITT: We've done a "Call to Action" to promote things people are implementing already. We don't even have the reports out, and they're already implementing some of the best practices that we found in this Call to Action.

So I think it speaks pretty highly that this is an industry- and let's face it, a bad safety record is bad for business, too. It's not without, you know, some motivation that you should be safe. But the good news is they are.

MILES O'BRIEN: It's too early to know what impact these changes will have on safety at regional airlines, but skeptics say they've heard these promises before.

MARY SCHIAVO, Plaintiff's Attorney: We hear from the FAA "one level of safety." We heard from the FAA that they no longer promote the carriers. They throw out terms of art designed to lull the public into the belief that all carriers are equally safe. And that was something that they said again and again and again after the ValuJet crash and other crashes. They say, "All carriers are equally safe." The public is starting to figure out that's not true.

MILES O'BRIEN: Some insiders see the need for a more fundamental solution. The industry's problems will not be solved, they say, until the major airlines take greater responsibility for the safe operations of their regional partners.

BILL VOSS, Pres., Flight Safety Foundation: It's just not regulation. The industry needs to step forward and look at how this firewall that was developed because of business reasons between the line carriers and regionals doesn't make a lot of sense. Your experienced folks - not just in the cockpit but also the training organizations and the safety experts - are up in that other airline, in the big guy. They should be mentoring and bringing along and developing the regional carrier underneath.

CLAY FOUSHEE, Congressional Investigator: One thing that absolutely is their obligation is for them to be doing very, very thorough audits of those operators. They ought to be crawling around these regional operators. They need to have their hands on the operation. They need to have their hands on the training programs. Big brother needs to be looking over little brother because, again, Continental sold that ticket, not Colgan. People who bought that ticket thought they were flying on Continental and they thought they were buying Continental's safety.

KAREN ECKERT: This is not about two pilots. This isn't even about Colgan Air and Continental. This is about an industry. It's just morphed away from where it wanted to be, and it just slid away. And no one was watching and monitoring enough until you have crashes and you have loss of life.

KEVIN KUWIK: We got lulled into a false sense of security by the statistic that it is the safest period of air travel. We allowed some serious safety gaps to exist. And unfortunately, in our case, they all came together and we're feeling a lot of pain and hurt because of that.

FRONTLINE is a production of WGBH/Boston,
which is solely responsible for its content

ANNOUNCER: This report continues at FRONTLINE's Web site, where you can watch the full program gain, click a map to see which regionals fly out of major hubs and check their safety records, watch more video showing the life of a regional pilot, and learn more about the families of Continental flight 3407 and their lobbying for new airline safety legislation, plus read the extended interviews and join the discussion at PBS.org.

Next time on FRONTLINE: More than a decade before the economic meltdown, Washington was warned. Watch FRONTLINE.

And something new from FRONTLINE. In the days after Katrina, violent encounters between police and civilians.

- People were shot and killed by the New Orleans Police Department.

ANNOUNCER: Six controversial cases.

- There's no police report.

- They said something about a shootout.

ANNOUNCER: The Times-Picayune, Pro Publica, FRONTLINE and you uncover the truth.